UPDATE 2-Judge denies BP effort to halt Gulf spill claim payouts

5 Min Read

By Kathy Finn

NEW ORLEANS, July 19 (Reuters) - A federal judge denied an attempt by BP Plc to suspend payments to people and businesses claiming damages related to the 2010 Gulf of Mexico oil spill, while an investigator looks into possible misconduct in the payout process.

The payments are being made under a program set up under a settlement BP signed last year. Judge Carl Barbier, who is overseeing the consolidated spill-related civil case against BP and its contractors, ruled on Friday that there was nothing to prove the “mass of claims” was not being properly evaluated.

“BP has not produced any evidence that would warrant the court taking the drastic step of shutting down the entire claims program,” said Barbier, who frequently interrupted BP lawyer Jeffrey Clark in the New Orleans courtroom as he pressed him for specific evidence of the claims process being compromised.

Barbier also made a point of speaking out against a BP “media frenzy” and widely reported “misinformation” about claims administrator Patrick Juneau being selected by the court when he had actually been proposed by all the parties, including BP.

Earlier this month, Barbier named former Federal Bureau of Investigation director Louis Freeh as a “special master” to investigate possible misconduct in the claims program.

Last month, Juneau placed team member Lionel Sutton on administrative leave and filed a report to Barbier about Sutton being accused of referring claimants to other lawyers in exchange for a cut of subsequent compensation. Juneau later said Sutton had resigned and that an internal probe had been launched. Sutton’s wife, who worked in Juneau’s office, also left.

Under its settlement signed last year, BP agreed to a compensation formula and framework covering certain personal and business liabilities. The company insists the formula is being misinterpreted, but Barbier has already ruled against BP, which has appealed. A U.S. appeals court is considering the case.

Rick Stanley, who represents Juneau and the claims administration office, said BP’s injunction request on Friday was premature given the internal and external investigations were open. He said nothing suggested the lawyers whose actions prompted the probes had influence over claims calculations.

“WRONG UNDER THE LAW”

In a statement released after Barbier ruled, BP spokesman Geoff Morrell said the company believed Barbier’s ruling was “wrong under the law” and that a pause of all claims payments was prudent and necessary during Freeh’s investigation.

“There is a material risk that payments going out the door have been and continue to be tainted by possibly fraudulent or corrupt activity,” Morrell said, adding that BP should not bear the risk of improper payments before Freeh completes his probe.

According to the official program website, more than 200,000 claims of all types have been filed, and more than $4.1 billion worth have been deemed eligible for payment, which is more than half of the money BP set aside for payments. The process is due to run until next April.

On Friday, Barbier criticized BP Chief Executive Bob Dudley for saying in a televised interview that Juneau had ‘hijacked’ the settlement program. Barbier called the accusation “offensive and inappropriate language, especially coming of all things from the chief executive of one of the parties to the settlement agreement.”

Barbier said the claims process, by design, required many layers of review for each claim by lawyers, accountants and supervisors in the claims administrator’s office, and that all the parties could review every decision. BP, therefore, had no reason to request a halt to the process, he said.

In his summation, Barbier took particular issue with BP’s attempts to influence public opinion through its media campaign, and praised Juneau for his “commendable” performance.

“I will continue to try this case in the courtroom and not in the press,” Barbier said. “I certainly have no intention of allowing a media frenzy to cause me to shut down the entire settlement ... BP has failed to make such a showing and accordingly it’s ordered that the motion is denied.”

The trial under Barbier to determine blame and overall damages from the spill is ongoing. It is in re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, U.S. District Court, Eastern District of Louisiana, No. 10-md-02179.

The appeal is “BP Exploration & Production Inc et al. vs Lake Eugenie Land & Development Inc, et al.” in the U.S. Court of Appeals for the Fifth Circuit, No. 13-30329.